Payments industry rethinks business model for the digital era

Making a payment, transaction or moving money should be as simple as sending a text message to a friend, says Stephen Karpin of Visa.

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The payments industry in Australia and New Zealand is undergoing a period of increasingly rapid change with new technologies, innovations and a desire for instant gratification transforming the way we pay, says Stephen Karpin of Visa.

“We’re in an environment where speed matters more than it ever has. So does simplicity,” says Karpin, who is Visa group country manager for Australia, New Zealand and South Pacific.

“Making a payment, transaction or moving money should be as simple as sending a text message to a friend,” says Karpin. “This forces a rethink of how we do business.”

He says financial institutions, merchants, governments, startups and developers must work together to create the commerce experiences of the future.

He lists three technology trends that are providing challenges and opportunities for all players in the payments industry.

Stephen Karpin, group country manager for Visa in Australia, New Zealand and South Pacific

We have only scratched the surface of how the Internet of Things will transform our lives and what we expect from everyday services

Customer experience matters

Customer expectations are higher than ever before, because we are all more impatient than before, he states.

The majority of people won’t wait more than two seconds for a video to load online, he states. People don’t want to queue. “Fast lane is the new normal.”

Thus, the payment experiences that succeed are the ones that offer a relevant customer experience, by adding convenience, subtracting a pain point or adding value in a new way, he says.

This is exemplified by the phenomenal growth of contactless payments.

“We’re starting to see Visa payWave transactions shifting to mobile,” he states. “The mobile payment experience has to be as good or better to supersede plastic and we believe this is now the case.”

The Internet of Things

Connected devices, meanwhile, are getting smarter, says Karpin, citing Cisco’s estimates that Internet-connected things will reach 50 billion by 2020.

“We have only scratched the surface of how the Internet of Things will transform our lives and what we expect from everyday services,” he says.

“What happens when everything across manufacturing, government and industry becomes digitised? This is a profound leap that hasn’t happened yet.”

“The reality is that most commerce transactions today are not seamless,” he states. “And we see the opportunity with the connected commerce world as very exciting.”

Open innovation

Technology has made innovation more accessible and it’s being delivered by everyone, says Karpin.

To innovate in the future, it may no longer be necessary to own the entire value chain. Application Programming Interfaces (APIs) are quickly becoming the building blocks by which companies come together and collaborate to build new customer experiences.

Businesses already recognise the power of APIs, with 7 in 10 expecting partner APIs to be broadly adopted across their industries within the next two years.

Marty Kerr, country manager, Visa New Zealand and South Pacific

Startups and end users are playing a role in designing new products and services

“We must all work together to best harness innovation, wherever it originates, to create the best customer experience,” says Karpin.

“Innovation no longer means owning the entire value chain,” adds Marty Kerr, country manager for New Zealand and South Pacific, at Visa.

“With the pace of change in our industry, it is clear innovation can come from anywhere. It’s no longer delivered just by large corporates. Startups and end users are playing a role in designing new products and services,” says Kerry.

A culture of co-creation

Karpin says with these trends, he sees a huge opportunity for co-creation across the payments system.

He points out the release early this year of Visa Developer, a platform where developers at merchants, financial institutions, technology companies and startups have open access to Visa technology, products and services via its APIs.

Visa also launched The Everywhere Initiative, a competition that poses real life business challenges to the startup community in order to bring new ideas to payments.

“We see this and other forms of co-creation as a way to accelerate the discovery of previously unimagined ways to pay,” says Karpin.

“Our business model has traditionally been large retailers, banks and government plugged into our networks,” adds Kerr.

“We are disrupting our own business model to make sure we are as relevant now as we have always been but also we have been.”